Warehouse management 101: process & best practices

Successful sellers know that efficient warehouse management is the key to on-time delivery and cost-effective operations.

But top sellers also know that the fruits of excellent warehousing won’t just fall into your laps. Instead, success often requires a deep understanding of inventory management and control and deliberately crafting a process that maximizes results.

If you’ve struggled with unwieldy warehouse operations or are seeking ways to improve your process, we’ve created this guide to help. Here, we discuss the fundamental processes that underlie effective warehouse management operations and best practices you can implement for better and more efficient warehousing.

What is warehouse management?

If you sell goods, you likely need a place to store them between orders (unless you’re dropshipping). Often, that storage happens in a warehouse or fulfillment center.

But, things can get incredibly messy between receiving stock, stowing goods, and retrieving them to meet orders. Without a properly organized warehouse, it’s easier for fulfillment delays to occur, with customers receiving their orders late, incorrectly, or not at all.

Warehouse management is the process that ensures the seamless transition of stock into and out of your warehouse. While inbound and outbound logistics can complicate operations for a growing business, warehouse management simplifies and speeds up the process.

Also called warehousing, warehouse management covers every aspect of the fulfillment process. This includes tracking, receiving, storing, picking, packing, and shipping inventory. But that’s not all.

Warehouse management aims to make all the moving parts of your warehouse interlock smoothly. So, it also includes measures like staff training, inventory planning, workflow design, and performance tracking. It helps companies, both big and small, monitor their fulfillment process, identify problem areas, and take satisfactory action without interrupting inflow/outflow.

Good warehousing has perks that are immediately apparent.

• Improved customer satisfaction: While warehouse operations are invisible to customers, they have a visibly positive impact on delivery speed and accuracy.
• Cost savings: A well-organized warehouse makes inventory easy to store, find, retrieve, and ship, saving your business the cost of extra labor and work hours.
• Smoother supply chain: The benefits of warehouse management ripple across the supply chain, ensuring orders enter faster, leave quickly, and optimize warehouse space.

What is a warehouse management system?

As you’ve seen, warehouse management is a big undertaking. And it gets even more complex the faster and bigger a business grows. Consequently, companies support their warehouse managers and staff with warehouse management systems to enable effective warehousing.

Warehouse management systems, or WMS, involve software and hardware tools that facilitate smooth warehouse operation. WMS may be referred to as warehouse management software or inventory management software when used exclusively online. But ultimately, it includes tools that help make your life easy when it comes to warehousing and fulfillment.

WMS often comes as part of a larger enterprise resource planning (ERP) suite. Although, it can also be a standalone product that supports simplifying and optimizing warehouse management. A WMS adds value to your warehousing process by:

• Providing real-time visibility into inventory levels and location
• Leveraging data analytics and automation to forecast demand and sales
• Employing artificial intelligence (AI) to design and execute efficient daily operating plans
• Offering instructions to guide staff through daily processes such as receiving and storing inventory, in line with predefined rules
• Monitoring performance and providing a ready snapshot of operations health and issues

Apart from the value it brings to warehousing, WMS has recently risen significantly due to growing e-commerce trends. As statistics indicate, global e-commerce is expected to exceed $29 trillion in value by 2023¹. To keep up with that demand, companies in the US alone are expected to expand warehousing space by over 1 billion square feet by 2025².

WMS ensures companies can effectively scale warehouse operations in response to growing demand. Similarly, it’s worth noting that, even as e-commerce heats up, customers are cooling down regarding delivery lead times. People want their deliveries faster, and companies can only meet that expectation with top-quality WMS.

5 primary warehouse management processes

Being a core component of supply chain management, warehouse management processes vary depending on the products you sell. For example, companies that sell perishables will have different approaches from durable goods suppliers. Likewise, manufacturing companies maintain different processes in terms of storage and handling compared to trading companies.

Despite these differences, the warehouse management process has certain core objectives. They are as follows:

1. Inventory tracking

Inventory tracking involves monitoring and constantly updating stock levels. Companies need to know what items are available in the warehouse, where they are stored, and at what level they must be replenished.

This warehouse management step ensures complete visibility into the state of your inventory, ensuring that your staff knows the exact condition of specific products. Likewise, inventory tracking is vital in supervising supplies from vendors, including where they are and if they’ll be enough.

With proper inventory tracking, it’s easier to understand the ebb and flow of products through the warehouse. As a result, your workers can rapidly tell what quantities of a product are available for orders and when those levels need refreshing. Inventory tracking also helps with demand forecasting, and the inventory accuracy it provides will be vital as your business expands.

2. Receiving and stowing

When goods arrive in your warehouse, they need to be efficiently and rapidly stored. In an effective process, stock moves in a continuous line from trucks at loading docks, where they are scanned, to pallets, shelves, or freezers where they will be stored.

Any hesitation or confusion about where each item goes can create bottlenecks that slow or halt the process. As a result, warehouse staff will usually use handheld screens with clear instructions on receiving, unpacking, and storing inventory.

Stowing is a sensitive process because accessible storage is vital for rapid retrieval. Companies may choose to store products by allocating storage zones based on several tactics, such as “first-in, first-out” (FIFO) or ABC analysis. For example, FIFO aims to ship older goods first, meaning your staff will store the newer stock in a different area.

Meanwhile, ABC analysis ranks products according to their rate of sales. Goods that sell fastest are stored in the most accessible locations to enable staff to fulfill those orders quicker.

3. Picking and packing

Although picking is a relatively simple aspect of warehousing, it requires good planning and foresight. When orders come in, your staff will be responsible for retrieving the ordered items, which is called picking. Companies employ several tactics here to minimize effort and accelerate the picking process, such as:

• Zone picking: Warehouse staff picks specific items from the same zones. The tactic works best for sellers with items commonly stored and ordered together.
• Discrete picking: Discrete picking doesn’t follow any particular order. It’s mostly your staff walking through the warehouse and selecting items. But this is best for small stores.
• Wave picking: Wave picking is similar to discrete picking, except that it only happens at specific intervals. Workers can spend the rest of their time on other tasks.
• Batch picking: For this tactic, warehouse staff simultaneously picks all the items in a specific group of orders.

After picking, it’s time for packing next. Depending on the intricacy of your products, packing may be straightforward or complicated. Again, companies introduce efficiency at this stage by maintaining an organized, efficient system that relies on checklists for order accuracy.

4. Shipping

At this stage of the warehouse process, you’ve done most of the work of fulfillment. All that’s left is to get the order to its owner. But shipping can also throw up complex problems, especially relating to costs, distance, and maintaining the integrity of the shipped item.

Regarding item integrity, you should have a few problems here if you’ve done packing correctly. Box sizes should be big enough to accommodate the goods without taking up more space than necessary. Also, packing should account for the nature of the item – for instance, wet goods should have waterproof packing, and frozen products should be in cool packaging.

Once shipped, you should also have a system to track orders and a straightforward interface to share order status with customers. Many companies outsource the shipping process to logistics companies, or they may let a B2B e-commerce platform like Alibaba.com handle this.

5. Reporting

Finally, it's time to take stock once orders are packed, shipped, and successfully delivered. You’ll update the state of your inventory after the outgoings and report on key performance indicators (KPIs) relating to total orders shipped, accuracy, efficiency, and more.

Companies typically use warehousing software to help provide maximum transparency on required KPIs. For example, the software will record returns due to mis-picks, mis-packs, or damaged items and help you identify how those errors occurred. Of course, human errors are unavoidable in any fulfillment operation, but they are easier to minimize with an effective WMS.

You’ll notice that each of these warehouse processes flows into one another. For example, packing largely determines shipping; neither picking nor packing will go smoothly if stowing is poor. Therefore, planning an effective approach to each step will help produce better outcomes and a more effective process overall.

11 best practices for warehouse management 101

We’ve discussed what warehouse management entails and how the process works. Now, it’s time to learn about warehousing best practices and how to apply them. Here are eleven tips for more effective warehouse management that you can implement today.

1. Warehouse management system

While we’ve mentioned WMS tools above, it bears repeating. Warehousing software is indispensable to effective warehouse management, and all successful sellers know this. Expensive warehouse leases and a tight labor market already make warehousing difficult enough. But the right WMS can help you save space and dispense with additional labor costs.

Sellers worldwide are waking up to the value that WMS can provide. Consequently, 85% of warehouse operations are adding WMS to their tool cache³. In addition, industry experts, identify robotics and AI as a key trend in warehouse management in 2022, signaling a greater shift to smart inventory management.⁴

2. Cloud storage

Beyond simply aiding warehouse processes with technology, savvy sellers are also moving their warehouse operations to the cloud. Cloud computing offers considerable advantages to businesses in terms of data storage, accessibility, support, and availability.

While you’d ordinarily worry about how to store the data you generate from using WMS on-premises and hiring an IT team to manage those operations, cloud computing takes away that concern. In addition, by outsourcing data storage to a cloud provider, you save the costs of a dedicated IT team.

At the same time, you can pay for the exact amount of storage you need, saving the costs of an expensive on-premises server that you may never fully use.

3. Data collection tech

The industry has moved beyond manually recording incoming shipments and storage locations. Instead, sellers are implementing data collection technologies such as bar codes, radio frequency identification (RFID), and stock-keeping units (SKUs).

These data collection technologies enable automated recording of inbound and outbound stock, freeing your staff from the archaic process of entering records manually. Smart data collection also allows greater visibility and accuracy in warehousing and helps eliminate the risk and cost of human errors.

4. Automation

Warehouse management includes numerous processes that run better and faster when left to automated workflows. For instance, determining where the stock should be stored and how it should be retrieved and packed is a process that benefits from automation.

When automated, processes like this happen at the speed of thought and cut out the time spent on needless speculation about each item’s best location or packaging. Consequently, your company can enjoy a faster process and free up staff to contribute more value in other areas.

Another aspect of automation is using robotics and conveyor belts to pick and deliver items to a collection point. This removes the need for staff to manually sort through shelves or pallets to locate and retrieve ordered items.

5. Hands-free picking

With automated picking, it’s easier to call up identified items with the touch of a screen or using a voice pick tool. Workers can be equipped with a wrist-mounted or handheld radio frequency unit to select and retrieve pre-determined items.

By reducing the amount of physical labor involved in the process, companies can improve turnaround time and increase warehouse throughput – the rate at which new items enter and exit the warehouse.

6. Wave planning

Warehouse management drives efficiency, and wave planning is another practice that encourages this. With wave planning, warehouse staff can plan to pick waves along the most efficient routes to reduce picking time and effort.

Wave planning can be highly beneficial for small businesses since it combines discrete picking with targeted tactics that consolidate picking efforts and concentrate them along the most effective routes.

7. Touch minimization

Excessive handling can be bad for certain goods. Too many touch points can increase the risk of damage, dirtying, or mishandling. Resultantly, cutting down on touch points gives your process greater integrity.

Touch minimization also helps hasten your fulfillment process since it eliminates redundant retrieval and shelf return. Under this practice, companies ensure that items are only retrieved when it’s inevitable that they will be shipped.

8. Cycle counting

Although WMS are great at monitoring inventory levels, prudent sellers also maintain inventory control through manual counting. This is excellent practice, as it helps reconcile inventory figures and verify that your WMS and physical systems are in sync.

However, rather than fixing rare days for physical counting, implementing cycle counting is a more significant benefit. Cycle counting helps break up the counting burden and ensures that you can accurately gauge your stock levels without the disruption that a single-day count can bring.

9. Warehouse safety

It’s essential to recognize that effective warehouse management is not only about your stock and WMS. It also involves ensuring that your workers have the tools to be effective and remain safe while carrying out their assignments.

Make efforts to secure and install all necessary safety equipment and health measures. Don’t forget that a nasty injury to one of your staff can stall operations just as effectively as delayed shipping or faulty inventory tracking.

10. Standardized vendor operations

Managing suppliers effectively can also produce efficiency and cost savings. You can coordinate vendor input across three critical points:

• Delivery times (time of day, week, month)
• Delivery form (volume, packing, boxes)
• Delivery location (loading docks or external location)

Managing these three factors across suppliers helps ensure a steady stream of supplies arriving exactly when needed.

11. Daily health check

Finally, tie it all together with regular and in-depth health checks to determine the state of your warehousing operations. Assessing the state of operations against your warehouse KPIs will help you quickly tell what’s going according to plan and what isn’t.

Then you can take appropriate remedial action, whether that involves tweaking a process, adding a new step, or taking out convoluted processes causing bottlenecks.

Find durable and safe warehouses on Alibaba.com

Overall, good warehouse management presents the best opportunities to meet customer demand and ensure total satisfaction. And when combined with current technology, warehousing best practices provide the tools to grow your business and attract more sales as you serve an expanding customer base.

If you’re on the hunt for durable warehousing, Alibaba.com provides a comprehensive seller directory where you can find top-quality suppliers at insider prices. Open a seller account today to start searching.